Fuel Shock: Iran-Israel War Sparks Global Energy Crisis, Hits Asia Hard
Fuel Shock: Iran-Israel War Sparks Global Energy Crisis, Hits Asia Hard
A widening military conflict between Iran and Israel is triggering a severe global energy crisis, with sharp fuel shortages and soaring prices now hitting consumers and businesses worldwide, particularly across Asia. The disruption stems from attacks on critical infrastructure and new shipping restrictions in the Persian Gulf, a region that supplies a massive portion of the world's oil and gas [110612].
The crisis intensified after a major missile and drone attack damaged Qatar's Ras Laffan liquefied natural gas (LNG) terminal on March 19. The facility, which supplies 20% of the world's LNG, suffered substantial damage, with fires reported across its gas-to-liquids plant. Analysts warn this single attack will disrupt global supplies and keep energy prices high for years to come [110079].
Further escalating the situation, Iran has declared it will now restrict safe passage through the Strait of Hormuz—a chokepoint for about one-fifth of the world's seaborne oil—to only those vessels it deems "non-hostile" to Iran, explicitly barring ships linked to Israel or the United States. The announcement by Iran's Revolutionary Guard, which controls access to the strait, has created immediate uncertainty for global shipping and oil markets [110903].
The combined effect of infrastructure damage and shipping threats is causing acute shortages. From India to Australia, businesses and households are being forced to ration fuel. A shopkeeper in Coimbatore, India, stated, “I am far away from the Middle East, but my life is affected. The gas cylinder is not available because of the war” [109761]. Industry experts warn the current crunch could surpass the energy crises of the 1970s and the more recent disruption caused by the war in Ukraine [109761].
Asia is especially vulnerable due to its heavy reliance on Gulf energy. The region is experiencing a direct shock, with increased costs for transport and electricity threatening factory production and household budgets [110612]. In a significant shift, the disruption to LNG supplies is forcing major Asian economies to turn back to coal to secure power, a move analysts say will stabilize energy in the short term but worsen air pollution and undermine climate goals [110108].
The economic fallout extends beyond energy. Economists warn that a prolonged war damaging Gulf economies could endanger the vital flow of billions of dollars sent home by millions of South Asian migrant workers in the region. These remittances are a critical source of income for families and a key support for national economies in countries like India, Pakistan, and Bangladesh [110462].